The Pound Canadian Dollar (GBP/CAD) exchange rate steadily strengthened through the week amid slumping oil prices and elevated rate hike bets from the Bank of England (BoE).
What’s Been Happening: GBP/CAD Exchange Rate Firms Despite Persistent UK Headwinds
The Pound (GBP) started the week on the back foot as a downbeat mood weighed on the currency. However, lower-than-expected government borrowing figures offered support on Tuesday on hopes for further spending and tax cuts from Chancellor Jeremy Hunt later in the year.
In mid-week trade Sterling found support as the Confederation of British Industry’s (CBI) distributive trade survey showed retail sales unexpectedly rose.
Providing further support at the end of the week was the elevated rate hike expectations from the BoE. Optimism continues to grow of the probability that the central bank will increase the interest rates by 25bps at the next meeting.
Meanwhile, the Canadian Dollar (CAD) started strongly as WTI crude oil prices climbed, taking the ‘Loonie’ with it. However, a risk-off market mood soon sapped demand, and oil prices slumped.
The minutes from the Bank of Canada’s (BoC) last policy meeting helped limit losses. Hawkish rhetoric suggested the bank’s hiking cycle may not be over just yet.
At the end of the week and Canada’s economy grew less than expected. Against predictions of a 0.2% increase, monthly GDP only grew by a modest 0.1% in February, and March’s preliminary figure came in at a 0.1% decline, pulling CAD lower.
Three Things to Watch Out for This Week
- UK PMIs
Should an upwards revision to the UK’s latest manufacturing PMI be mirrored in April’s finalised services PMI the Pound could strengthen.
- Canada Employment Data
Unemployment in Canada is expected to climb to 5.1% in April. Will this lead the ‘Loonie’ to weaken at the end of the session?
- Risk Sentiment
Also influencing GBP/CAD will be market risk appetite. Will a cautious mood weigh on Sterling sentiment?
Pound Canadian Dollar Forecast
Elsewhere, declining oil prices could continue to influence the commodity-linked ‘Loonie’, potentially dragging the Canadian Dollar lower.